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yes but the market maker would not have sold it unhedged. The price
change would not have changed the MM's p/l at all.
kohath wrote:
> The point here is, the call went from 40 to 2.5, a 1600% decrease in
> price,the Put went from 1.5 to 10.5, a 700% increase in price. What I
> was pointingout was that, as a market maker, had I sold you 1 call at
> 40 and 1 put at 1.5,I would still be ahead 40 - 2.5 = 37.5, 1.5 - 10.5
> = 9, 37.5 - 9 = 28.5. So,I would have a 28.5 X 100 = $2,850 profit
> for each of a call/put combination sold.That is why I said the price
> of the stock is irrelevant. Yes, the stock droppedsignificantly, but,
> look what the options did. Yes, there is more to being amarket maker
> than this simple illustration, but, there is a distinct advantageto
> selling verses buying.Kohath
> ----- Original Message -----
> From: Ira Tunik
> To: kohathCc: realtraders@xxxxxxxxxxxxxxxx: Friday, August 13, 1999
> 11:04 AMSubject: Re: Amzn Call/Put 100 Strike
> If you feel that the stock price is irrelevant, I'll take the other
> side of your trades all day long. The conversion reversal would have
> kept the puts and calls in direct relationship to one another. It
> looks to me like the calls started in the money and then ran out.
> Half a truth doesn't prove that you are right. Ira.
> kohath wrote:
>
>> It's irrelevant where the stock was then and where it is now. The
>> point is,Selling always brings in a higher percentage than buying,
>> always! Becauseof the melting value of options, but, with selling
>> there is limited profit withunlimited risk!Kohath
>> ----- Original Message -----
>> From: Ira Tunik
>> To: kohathCc: realtraders@xxxxxxxxxxxxxxxx: Friday, August 13, 1999
>> 10:40 AMSubject: Re: Amzn Call/Put 100 Strike
>> You left out one very important fact. Where was the stock at point
>> one and at point 2 in your example. Why don't you post the stock
>> chart too? Ira.
>>
>> > Charts of AMZN 100, Call, Put.Call went from $40 to $2.50, put went
>> > from $1.50 to $10.50.As can be seen, same strike, same time frame.
>> > This is whyselling is more profitable than buying, but, selling
>> > involvesmuch higher risk. These two charts also show the
>> > marketmakers have a distinct advantage because of the meltingvalue
>> > of the options.Now if we had only sold 100 contracts of the YZZHT
>> > on July 16th!Kohath
>>
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yes but the market maker would not have sold it unhedged. The price
change would not have changed the MM's p/l at all.
<P>kohath wrote:
<BLOCKQUOTE TYPE=CITE> The point here is, the call went from 40 to
2.5, a 1600% decrease in price,the Put went from 1.5 to 10.5, a 700% increase
in price. What I was pointingout was that, as a market maker, had
I sold you 1 call at 40 and 1 put at 1.5,I would still be ahead 40 - 2.5
= 37.5, 1.5 - 10.5 = 9, 37.5 - 9 = 28.5. So,I would have a 28.5 X
100 = $2,850 profit for each of a call/put combination sold.That is why
I said the price of the stock is irrelevant. Yes, the stock droppedsignificantly,
but, look what the options did. Yes, there is more to being amarket
maker than this simple illustration, but, there is a distinct advantageto
selling verses buying.Kohath
<DIV style="FONT: 10pt arial">----- Original Message -----
<DIV style="BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A HREF="mailto:ist@xxxxxx"; title="ist@xxxxxx">Ira
Tunik</A></DIV>
<B>To:</B> kohath<B>Cc:</B>
realtraders@xxxxxxxxxxxx<B>Sent:</B>
Friday, August 13, 1999 11:04 AM<B>Subject:</B> Re: Amzn Call/Put 100 Strike</DIV>
If you feel that the stock price is irrelevant, I'll take the other
side of your trades all day long. The conversion reversal would
have kept the puts and calls in direct relationship to one another.
It looks to me like the calls started in the money and then ran out.
Half a truth doesn't prove that you are right. Ira.
<BR>kohath wrote:
<BLOCKQUOTE TYPE="CITE"> It's irrelevant where the stock was then
and where it is now. The point is,Selling always brings in a higher
percentage than buying, always! Becauseof the melting value of options,
but, with selling there is limited profit withunlimited risk!Kohath
<DIV style="FONT: 10pt arial">----- Original Message -----
<DIV style="BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A HREF="mailto:ist@xxxxxx"; title="ist@xxxxxx">Ira
Tunik</A></DIV>
<B>To:</B> kohath<B>Cc:</B>
realtraders@xxxxxxxxxxxx<B>Sent:</B>
Friday, August 13, 1999 10:40 AM<B>Subject:</B> Re: Amzn Call/Put 100 Strike</DIV>
You left out one very important fact. Where was the stock at point
one and at point 2 in your example. Why don't you post the stock chart
too? Ira.
<BLOCKQUOTE TYPE="CITE"><STYLE></STYLE>
Charts of AMZN 100, Call, Put.Call
went from $40 to $2.50, put went from $1.50 to $10.50.As can be seen, same
strike, same time frame. This is whyselling is more profitable than
buying, but, selling involvesmuch higher risk. These two charts also
show the marketmakers have a distinct advantage because of the meltingvalue
of the options.Now if we had only sold 100 contracts of the YZZHT on July
16th!Kohath <IMG SRC="cid:part1.37B4B4D8.A6FD465A@xxxxxxxxxxxx"; ALT="" BORDER=0 ></BLOCKQUOTE>
</BLOCKQUOTE>
</BLOCKQUOTE>
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